An E&E Special Report

LITIGATION:

Ecuadorean court upholds $18B judgment against Chevron

An appeals court in Ecuador yesterday upheld a multibillion-dollar judgment against Chevron Corp. for alleged oil pollution in the eastern part of the country.

The judgment could be worth up to $18 billion, although Chevron is fighting a no-holds-barred battle to avoid a payout to the indigenous Ecuadorean plaintiffs and their American lawyers.

Chevron claims the judgment is fraudulent and the allegations are baseless. It has filed a racketeering lawsuit against the plaintiffs' legal team.

Last February, Judge Nicolas Zambrano, based in the town of Lago Agrio, found Chevron liable for oil contamination caused by Texaco Petroleum Co. when it operated in the Andean nation from the 1960s to the '90s. Chevron later acquired Texaco.

In yesterday's decision, the three-judge court upheld Zambrano's ruling, saying that after reviewing the ruling and evidence, "this court does not find reasons to change what was previously ruled by the lower court."

The court also fought back against Chevron's continuing criticisms of how local courts have handled the case.

Throughout, Chevron "has found ways to make sure to hinder the process," the judges said. The oil giant has also "been responsible for incidents that prevented the proceedings of the trial" by challenging the legitimacy of the judges and the legal system, the judges added.

In a statement, Chevron stuck to its guns, calling the ruling "another glaring example of the politicization and corruption of Ecuador's judiciary."

The company made it clear that it has more faith in two other avenues it is pursuing: the federal racketeering suit that it filed in the Southern District of New York and arbitration proceedings between it and the Ecuadorean government.

In terms of Chevron's options in Ecuador, the company is still weighing what to do next, spokesman Kent Robertson said. One possibility is to ask the appeals court to clarify its ruling. Another would be to appeal to the next level in the Ecuadorean judicial system, the National Court of Justice.

As for the plaintiffs' legal team, led by New York-based attorney Steven Donziger, they may soon be able to attempt to start seeking to enforce Zambrano's judgment. This would happen outside Ecuador because Chevron has no assets there and is an outcome the company has been desperately trying to avoid.

Last year, Chevron obtained an injunction from U.S. District Judge Lewis Kaplan in New York that would have prevented the plaintiffs from enforcing the judgment in the United States and elsewhere.

But, in September, the 2nd U.S. Circuit Court of Appeals vacated the injunction.

That court has not yet issued a full ruling explaining why, but it is likely that the court's reasoning was affected by a letter the plaintiffs' lawyers sent in which they promised not to enforce the judgment "prior to the entry of a ruling on the de novo appeal currently pending before the Ecuadorian intermediate court."

Now that the Ecuadorean court has issued its ruling, it is not clear whether the plaintiffs are bound by that pledge any longer.

A spokesman for the plaintiffs said today that the "key issue" now is whether Chevron will be required to post a bond with the appeals court in Ecuador while it seeks to appeal to the National Court of Justice. If the company declines to do so, enforcement could commence in due course, the spokesman said.

Chevron did not respond to a question regarding the possibility of posting a bond.